Question 1

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel. If the world price of oil is $120 per barrel, this country will

Accepted Answer

When the world price is lower than the domestic price, the country will import oil to meet its demand at a cheaper rate. The difference between the domestic demand and domestic supply at the world price indicates the quantity imported, which is 14 million barrels.

Question 2

It is a valid argument that industries need to be protected from foreign competition because foreign wages are substantially lower than wages paid to U.S. workers.

Accepted Answer

While protecting industries from foreign competition due to lower foreign wages might protect domestic jobs in the short term, it can lead to inefficiencies, higher prices for consumers, and retaliation from other countries. Economic theory and practice suggest that free trade generally benefits countries by allowing them to specialize in industries where they have a comparative advantage.

Question 3

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel, and the world price of oil is $120 per barrel. If the domestic government imposes a tariff of $________ per barrel, it will eliminate all oil imports and achieve tariff revenues of $________.

Accepted Answer

To eliminate all oil imports, the tariff must raise the domestic price above the world price. Since the domestic price is $130 and the world price is $120, a $10 tariff would equalize the domestic price with the world price plus the tariff, eliminating imports. With no imports, there would be no tariff revenue, making option A correct.

Question 4

Free trade allows the people of a country to consume outside their production possibility frontier.

Accepted Answer

Free trade enables countries to consume goods and services that may not be efficiently produced domestically, thus allowing consumption beyond their own production capabilities or possibility frontier.

Question 5

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel. This country imports 14 million barrels if the world price of oil is

Accepted Answer

When the world price of oil is below the domestic price ($130), the country will import oil to meet its demand at a lower cost. At $120, the world price is below the domestic price, leading to imports.

Question 6

Related to the Economics in Practice on p. 673: The French economy would most likely have to pay higher prices for candles if the candle makers in the petition

Accepted Answer

If the candle makers in the petition were able to gain protection for their industry, typically through tariffs on imported candles or quotas limiting the number of imported candles, domestic prices would likely increase. This is because protectionist measures reduce foreign competition, allowing domestic producers to charge higher prices.

Question 7

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel. If the world price of oil is $135 per barrel, this country will

Accepted Answer

At a domestic price of $130 per barrel, if the world price is higher at $135, the country will export oil. The difference between the domestic quantity demanded (20 million barrels) and the domestic quantity supplied (25 million barrels) at this price is 5 million barrels, indicating the country will export 5 million barrels to the world market.

Question 8

The case for ________ is based on the theory of comparative advantage.

Accepted Answer

The theory of comparative advantage supports free trade by suggesting that countries should specialize in producing goods where they have a lower opportunity cost, leading to more efficient global production and trade.

Question 9

Refer to the information provided in Figure 20.4 below to answer the question(s) that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic consumption is

Accepted Answer

With free trade, the price of a leather wallet is $10, which is lower than the domestic price of $20. This lower price increases domestic consumption to 300 units.

Question 10

Related to the Economics in Practice on page 673: Satirist Frederic Bastiat's essay arguing for a quota on sunlight in order to protect domestic candle makers suggests that it is pointless to

Accepted Answer

Bastiat's satirical essay is a critique of protectionism, arguing that protecting industries that cannot compete effectively through measures like quotas is as absurd as blocking sunlight to protect candle makers. It highlights the inefficiency and pointlessness of such protectionist policies.

Question 11

A tariff imposed on imported wine will cause the domestic ________ of wine to increase and the domestic ________ of wine to increase.

Accepted Answer

A tariff on imported wine makes imported wine more expensive, leading to an increase in the domestic price of wine as the market adjusts. This higher price makes domestic production more competitive and profitable, encouraging an increase in domestic production of wine.

Question 12

Protection makes the people of a country better off.

Accepted Answer

Protection, in the context of trade policies like tariffs and quotas, can lead to higher prices for consumers, inefficiencies in domestic industries, and retaliation from other countries, which can overall negatively impact the economic welfare of a country's population.

Question 13

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel. This country imports 5 million barrels if the world price of oil is

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 14

Protection is often temporary to help infant industries.

Accepted Answer

The answer of Protection is often temporary to help infant...

Question 15

Related to the Economics in Practice on p. 673: Protectionism of the kind that is suggested in the petition of the candle makers would most likely result in

Accepted Answer

Protectionism, such as tariffs or quotas on imports, often leads to higher prices for consumers, which can reduce the quantity of goods consumed. It does not necessarily lead to more efficient production, lower prices, or lower production costs.

Question 16

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel, and the world price of oil is $120 per barrel. If the domestic government imposes a tariff of $10 per barrel, it will

Accepted Answer

With a $10 tariff, the effective world price becomes $130, equal to the domestic price, eliminating the incentive to import.

Question 17

Related to the Economics in Practice on page 673: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Accepted Answer

Protection for the candle makers, such as tariffs or quotas, would likely lead to higher prices for candles. This is because domestic producers would face less competition from foreign candle makers, allowing them to charge higher prices.

Question 18

A quota imposed on imported steel will cause the domestic ________ of steel to increase and the domestic ________ of steel to increase.

Accepted Answer

A quota on imported steel reduces the supply of steel in the domestic market, leading to an increase in the price of steel. As the price increases, domestic producers are incentivized to produce more, leading to an increase in domestic production.

Question 19

Free trade decreases world production and consumption.

Accepted Answer

Free trade increases world production and consumption by allowing countries to specialize in the production of goods and services in which they have a comparative advantage, leading to more efficient global resource utilization and higher levels of output and consumption.

Question 20

Refer to the information provided in Figure 20.4 below to answer the question(s) that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With the tariff domestic consumption is

Accepted Answer

The answer of Refer to the information provided in Figure...

Quiz 20: International Trade, Comparative Advantage, and Protectionism

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow. Figure 20.5 -Refer to Figure 20.5. The domestic price of oil is $130 per barrel. If the world price of oil is $120 per barrel, this country will

It is a valid argument that industries need to be protected from foreign competition because foreign wages are substantially lower than wages paid to U.S. workers.

Free trade allows the people of a country to consume outside their production possibility frontier.

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow. Figure 20.5 -Refer to Figure 20.5. The domestic price of oil is $130 per barrel. This country imports 14 million barrels if the world price of oil is

Related to the Economics in Practice on p. 673: The French economy would most likely have to pay higher prices for candles if the candle makers in the petition

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow. Figure 20.5 -Refer to Figure 20.5. The domestic price of oil is $130 per barrel. If the world price of oil is $135 per barrel, this country will

The case for ________ is based on the theory of comparative advantage.

Related to the Economics in Practice on page 673: Satirist Frederic Bastiat's essay arguing for a quota on sunlight in order to protect domestic candle makers suggests that it is pointless to

A tariff imposed on imported wine will cause the domestic of wine to increase and the domestic of wine to increase.

Protection makes the people of a country better off.

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow. Figure 20.5 -Refer to Figure 20.5. The domestic price of oil is $130 per barrel. This country imports 5 million barrels if the world price of oil is

Protection is often temporary to help infant industries.

Related to the Economics in Practice on p. 673: Protectionism of the kind that is suggested in the petition of the candle makers would most likely result in

Refer to the information provided in Figure 20.5 below to answer the question(s) that follow. Figure 20.5 -Refer to Figure 20.5. The domestic price of oil is $130 per barrel, and the world price of oil is $120 per barrel. If the domestic government imposes a tariff of $10 per barrel, it will

Related to the Economics in Practice on page 673: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

A quota imposed on imported steel will cause the domestic of steel to increase and the domestic of steel to increase.

Free trade decreases world production and consumption.